Emerging HSCRC Methodologies    Mary Beth Pohl         James Case    Deputy Director,        ManagerResearch and Methodolo...
Population Health Incentives under a CMS   Model Testing Demonstration Alter      HSCRC Methodology Focus• Today’s Discuss...
Healthcare Challenges During Waiver          Negotiations in the 1980s• Inpatient costs were rising rapidly across the U.S...
What Financial Policy Incentives Does       the Medicare Waiver Promote?                             • Lower utilization i...
Medicare Waiver Successes and                        Limitations    Successes                                  Limitations...
What Financial Policy Incentives Does a CMS  Model Testing Demonstration Promote?                    • Lower inpatient and...
The HSCRC’s Role in Enhancing             Population Health• CMS continues to pursue hospital reimbursement models that  s...
Model Testing Methods• Unit rates, annual update factor, and the variable cost factor• Reasonableness of charges• Hospital...
Unit Rates Underlay HSCRC Methodologies    1980     1990                2000              2010 2012 2013            GIR (1...
Annual Update Factor and               Volume Adjustment• Under a model testing demonstration, HSCRC regulatory  authority...
HSCRC Must Also Recast Reasonableness   of Charges (ROC) Methodologies• Tools to compare hospital charges continue to serv...
31 Hospitals Entered into ARR Agreements for                   FY 2012• Mercy                                    • Anne Ar...
ARR is a Voluntary Revenue Constraint   Program Developed by the HSCRC• ARR provides hospitals a financial incentive to mo...
ARR Builds Upon the Inpatient CPC       to Develop Bundled Weights• In weight development, HSCRC bundles CPC weights into ...
Using Medicare Data, Maryland has the Nation’s            Highest Readmissions Rate25.0%          MD         21.6%        ...
Medicare Readmission Rates per 1,000 Beneficiaries                                                                   MD   ...
HSCRC Must Seek Exemption from    CMS Readmissions Program in FY 2014• ACA provides Maryland an avenue to gain exemption f...
ARR Policy Likely to Evolve• Modification 1: Modifying ARR into a Shared Savings Model   – Preliminary options:       • Sc...
Total Patient Revenue, a Global Budget Arrangement, is in Place for 10 Hospitals• Establishes a global budget for all inpa...
Population-Based Reimbursement (“PBR”)• In alignment with CMS’ goals to provide incentives for  hospitals treating populat...
PBR Methodology – In Development• It is important to understand the components of the PBR  concept:   – Geographic area → ...
PBR Methodology – In DevelopmentGeographic Area• The defined geographic area must be an area that the PBR  hospital contro...
PBR Methodology – In DevelopmentHospital Spending• The PBR encompasses the HSCRC regulated charges in the  PBR zip codes f...
PBR Methodology – In DevelopmentMajor Service Lines• PBR hospitals would only be responsible for services they provide   –...
Methods Requiring CMS Authorization• Under a model testing demonstration, Maryland may request  authority for methods not ...
Bundled Payments• Maryland hospitals were not permitted to participate in CMS’  Bundled Payment initiative• One of the mos...
Bundled Payments• How could bundled payments work in Maryland without the  participation of physicians, post-acute provide...
Bundled Payments• Alternative Rate Arrangements (“ARM”)   – The Commission may permit arrangements to accept financial ris...
Quality• Under a new CMS model testing demonstration hospital and  system quality continues to be important   – CMS will r...
In Conclusion…• The State is working with CMS to develop a CMS model  testing demonstration with incentives around populat...
Emerging HSCRC Methodologies     Mary Beth Pohl           James Case     Deputy Director,          Manager Research and Me...
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Emerging hscrc methodologies case pohl (final)

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This presentation highlights the emerging methodologies the HSCRC will utilize to ensure success under CMS Model Demonstration project ("the new Waiver).

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Emerging hscrc methodologies case pohl (final)

  1. 1. Emerging HSCRC Methodologies Mary Beth Pohl James Case Deputy Director, ManagerResearch and Methodology KPMG LLP HSCRC
  2. 2. Population Health Incentives under a CMS Model Testing Demonstration Alter HSCRC Methodology Focus• Today’s Discussion: – Incentives under the Medicare Waiver and under a new CMS model testing demonstration – Emerging tools & methodologies for success under a CMS model testing demonstration 2
  3. 3. Healthcare Challenges During Waiver Negotiations in the 1980s• Inpatient costs were rising rapidly across the U.S. – Driver: Medicare and Medicaid cost-based reimbursement• Medicare, Medicaid, and Maryland did not recognize the costs of providing care to uninsured as a reimbursable expense.• Hospitals serving large proportions of non-paying patients were threatened with insolvency. – Issues of access for patients 3
  4. 4. What Financial Policy Incentives Does the Medicare Waiver Promote? • Lower utilization in the inpatient setting on a per case basis • Equity in payment across payers Medicare Waiver Test = – Inability to cost shift, especially from public to private payersExpenditures Per Discharge • Access to care, shared cost of social goods • Solvency of efficient and effective hospitals 4
  5. 5. Medicare Waiver Successes and Limitations Successes Limitations• Cumulative growth rate in the • Per discharge cost is the highest in the Maryland inpatient charge per case has nation outperformed the nation • Outpatient expenditures not well constrained• Maryland has incredible hospital access • The system is volume-based leading to care for all patient populations to potential overutilization• Maryland has been innovative in • Difficulty in aligning with physician system design of care related to cost financial incentives containment, quality, etc. • Cannot engage in certain CMS initiatives under the ACA 5
  6. 6. What Financial Policy Incentives Does a CMS Model Testing Demonstration Promote? • Lower inpatient and outpatient utilization per capita • Inpatient and outpatient cost containment • Equity in payment across payers Model Testing = – Inability to cost shift, especially from public to Expenditures Per private payers Population • Access to care, shared cost of social goods • Solvency of efficient and effective hospitals • Alignment of incentives across hospital and professional providers 6
  7. 7. The HSCRC’s Role in Enhancing Population Health• CMS continues to pursue hospital reimbursement models that shift operational mindsets to serve populations in geographic areas with low cost, high quality care. – Three part aim: Better health care (enhance patient experience, improve quality) Better health (healthy lifestyles, wider use of preventative care) Reduce cost• Under a model testing demonstration, HSCRC methodologies must align with drivers to improve population health. 7
  8. 8. Model Testing Methods• Unit rates, annual update factor, and the variable cost factor• Reasonableness of charges• Hospital revenue constraint – Admission-Readmission Revenue (“ARR”) – Total Patient Revenue (“TPR”) – Population-based Reimbursement (“PBR”)• New authorities – ACOs, Gain Sharing – Bundled Payments• Quality 8
  9. 9. Unit Rates Underlay HSCRC Methodologies 1980 1990 2000 2010 2012 2013 GIR (1985 – 2000) TPR (1980 – Current) CPC (2000 – Current) ARR (2012) PBR (TBD, 2013) Unit Rates (1974 – Current) 9
  10. 10. Annual Update Factor and Volume Adjustment• Under a model testing demonstration, HSCRC regulatory authority will continue to rely on the annual update factor and variable cost factor as revenue control levers.• HSCRC will need to recast application of the annual update factor and variable cost factor under a population-based constraint – Maryland must develop a robust all payer database 10
  11. 11. HSCRC Must Also Recast Reasonableness of Charges (ROC) Methodologies• Tools to compare hospital charges continue to serve an important role under a model testing demonstration• HSCRC must recast the ROC to align with a population based constraint• HSCRC is also investigating data sources for national comparisons 11
  12. 12. 31 Hospitals Entered into ARR Agreements for FY 2012• Mercy • Anne Arundel Medical Center• LifeBridge - Sinai • Bon Secours• LifeBridge - Northwest • St. Joseph Medical Center• UMMS - Baltimore Washington Medical • MedStar - Franklin SquareCenter • MedStar - Good Samaritan• UMMS - Civista Medical Center • MedStar - Harbor Hospital• UMMS - Harford Memorial Hospital • MedStar - St. Marys Hospital• UMMS - Kernan Hospital • MedStar - Montgomery General Hospital• UMMS - Maryland General Hospital • MedStar - Union Memorial Hospital• UMMS - Upper Chesapeake Medical Center • Holy Cross Hospital• UMMS - University of Maryland Medical • Washington Adventist HospitalCenter • Shady Grove Adventist Hospital• JHHS - Johns Hopkins Hospital • Peninsula Regional• JHHS - Johns Hopkins Bayview Medical • DoctorsCenter • GBMC• JHHS - Howard County General Hospital • Frederick Regional Health System• JHHS - Suburban Hospital • Saint Agnes 12
  13. 13. ARR is a Voluntary Revenue Constraint Program Developed by the HSCRC• ARR provides hospitals a financial incentive to more effectively coordinate care and reduce unnecessary readmissions to their facilities – Inpatient: all-cause, all-DRG, 30-day readmissions window – Current focus on readmissions within the facility or within the hospital system for “linked system hospitals”• Three year program beginning in FY 2012; currently in Year 2 of three year agreements 13
  14. 14. ARR Builds Upon the Inpatient CPC to Develop Bundled Weights• In weight development, HSCRC bundles CPC weights into Charge Per Episode (CPE) weights – For a given DRG-SOI, CPE approved revenue is higher than CPC equivalents• When grouping hospital discharges, HSCRC credits hospitals with all weight associated with a 30-day episode of care window at the initial admission – Readmissions receive no weight• A hospitals financially “wins” by reducing readmissions on a case mix adjusted basis by retaining 30-day CPE weight, while reducing the costs associated with the readmission 14
  15. 15. Using Medicare Data, Maryland has the Nation’s Highest Readmissions Rate25.0% MD 21.6% Medicare Hospital Readmission Rate 2010 US20.0% 18.2%15.0%10.0%5.0%0.0% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 Source: Institute of Medicine Geographic Variation Data Base 15
  16. 16. Medicare Readmission Rates per 1,000 Beneficiaries MD US25 21.11 20.3920 19.2 19.09 19.06 18.64 18.51 17.97 17.48 17.41 16.3 16.29 15.9215 15.44 15.04 14.91 14.96 14.64 14.32 14.31 14.3 14.34 14.33 13.77 13.51 13.7810 5 ARR Program 0 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Source: Delmarva Foundation 16
  17. 17. HSCRC Must Seek Exemption from CMS Readmissions Program in FY 2014• ACA provides Maryland an avenue to gain exemption from CMS’ Readmissions Reduction Program – FY 2013 IPPS final rule gives Maryland a pass on applying for the exemptions• Next year, HSCRC anticipates needing to submit an exemption request demonstrating how Maryland’s ARR program meets or exceeds Medicare’s program (savings and outcomes)• HSCRC and CMS staff discussed Maryland’s program structure – Maryland’s program viewed as “all carrot and no stick” – Strong indication that HSCRC must move ARR into model with explicit Medicare savings to exemption in FFY 2014 17
  18. 18. ARR Policy Likely to Evolve• Modification 1: Modifying ARR into a Shared Savings Model – Preliminary options: • Scaling approach that is not revenue neutral while setting the bar at a threshold in line with low readmission facilities – data challenges • Target modification –level of modification required, need modeling• Modification 2: Readmissions Payment Methodology for All – Hospitals not under an alternative agreement will adhere to payment methodologies of ARR• Modification 3: Move one-day stay cases back into CPC/CPE – ARR “wins” held neutral for decrease in one-day stay cases Stay Tuned… 18
  19. 19. Total Patient Revenue, a Global Budget Arrangement, is in Place for 10 Hospitals• Establishes a global budget for all inpatient and outpatient hospital services for a facility – Annually, each TPR hospital global budget inflated by the annual update factor, plus a population adjustment (capped); no case mix adjustment• Best serves hospitals with defined catchment areas• HSCRC developing TPR monitoring tools – More timely snapshots, merging case mix and financial information• TPR hospitals in year 3 of three year agreements – Discussions happening for next TPR agreements 19
  20. 20. Population-Based Reimbursement (“PBR”)• In alignment with CMS’ goals to provide incentives for hospitals treating populations, the HSCRC has begun exploring concepts in Population Health Management• The methodology is still in development but it’s concepts are as follows. 20
  21. 21. PBR Methodology – In Development• It is important to understand the components of the PBR concept: – Geographic area → controls activity (cases and visits) in identified zip codes – Hospital spending → includes both inpatient and outpatient services – Major services lines → responsible only for services that they provide • Excludes tertiary services • Excludes specialty services 21
  22. 22. PBR Methodology – In DevelopmentGeographic Area• The defined geographic area must be an area that the PBR hospital controls• Control is defined at the zip code level on a percentage basis. Options under consideration include a range: – 25% to 75%• Approximately 50% of the patient activity suggests the PBR hospital has significant market penetration to influence patient health – Less than 50% may not provide significant control 22
  23. 23. PBR Methodology – In DevelopmentHospital Spending• The PBR encompasses the HSCRC regulated charges in the PBR zip codes for all hospitals – It includes both inpatient and outpatient charges• PBR zip code thresholds could be set using an equivalent case 23
  24. 24. PBR Methodology – In DevelopmentMajor Service Lines• PBR hospitals would only be responsible for services they provide – For example: If the PBR hospital did not provide obstetric services, they would be excluded from the PBR. – Currently testing methodologies for service exclusion: • APR-DRG basis for inpatient services • CPT/ICD-9 basis for outpatient services• Other exclusions could include services outside the PBR hospital’s control. For example: – Tertiary services (example: certain services provided JHH and UMMC) – Specialty services (example: certain services provided at Kernan) 24
  25. 25. Methods Requiring CMS Authorization• Under a model testing demonstration, Maryland may request authority for methods not currently available to the state – ACOs – Gain sharing – Bundled payments• Maryland’s all payer hospital system provides power of scale to magnify system savings under ACOs, gain sharing, and bundled payment initiatives – We recognize the need of these methods to enhance TPR, PBR, and ARR – However, translating these to an all payer environment is not well defined; will require much activity to establish the programs 25
  26. 26. Bundled Payments• Maryland hospitals were not permitted to participate in CMS’ Bundled Payment initiative• One of the most valuable parts of applying for the bundled payment initiative was access to the underlying data 26
  27. 27. Bundled Payments• How could bundled payments work in Maryland without the participation of physicians, post-acute providers, and other provider entities?• Bundled payments are not a new concept – Charge per case – Charge per episode – Alternative Rate Methodologies (“ARM”) 27
  28. 28. Bundled Payments• Alternative Rate Arrangements (“ARM”) – The Commission may permit arrangements to accept financial risk for the provision of hospital services under certain conditions and circumstances. • Capitated contracts • Global pricing • Case-rate pricing • Procedure-based pricing – Must be based on underlying cost – Must be available to all payers on the same terms and conditions 28
  29. 29. Quality• Under a new CMS model testing demonstration hospital and system quality continues to be important – CMS will require monitoring across a range of indicators including access to care and patient experience – CMS also will require reporting• Continue to move forward initiatives to keep pace with CMS quality programs 29
  30. 30. In Conclusion…• The State is working with CMS to develop a CMS model testing demonstration with incentives around population health management.• The HSCRC’s tools and methodologies must support the shift in this operational mindset.• It will take significant efforts from HSCRC and hospital staff to develop thoughtful methods to succeed under this new model testing approach. 30
  31. 31. Emerging HSCRC Methodologies Mary Beth Pohl James Case Deputy Director, Manager Research and Methodology KPMG LLP HSCRCMary.Pohl@maryland.gov jcase@kpmg.com
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